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The Initiative for a Competitive Inner City’s (ICIC) study of the Prison Entrepreneurship Program’s (PEP) graduate entrepreneurs finds an annual economic impact of $122.5 million from the businesses that have been launched by these returning citizens. In addition, the estimated annual savings to taxpayers is over $4 million per year.

The situation for most returning citizens is dire. Across the country, between 60 percent and 75 percent of former convicts remain jobless a year after their release, according to the National Employment Law Project. This lack of economic opportunity drives a national recidivism rate that is in excess of 50% and a Texas prison recidivism rate for men of 24%. PEP’s success has resulted in a recidivism rate of 7% and employment rate of 100% within 90 days of release. This new ICIC study demonstrates the benefits of entrepreneurship and employment as a means to further reduce recidivism and create meaningful economic value and impact.

Creating Economic Opportunity for the Formerly Incarcerated

Since its inception in 2004, 2,180 individuals have graduated from PEP. Between 2004 and January 2018, PEP graduates have established 361 businesses. Fifty-seven percent of the businesses remain open today, which is higher than the average for Texas during the same time period (53 percent). In total, nearly one in four released PEP graduates have started a business.

Of the PEP graduates who do not start businesses, most are gainfully employed. In 2017, 67 percent of PEP graduates surveyed were employed, while 28 percent were entrepreneurs actively running a business and just 5 percent were unemployed.

Both PEP graduate employees and entrepreneurs earn significantly higher wages than the Texas minimum wage. The average wage of PEP graduate employees surveyed was $17.17 per hour, 137 percent greater than minimum wage. The average wage of PEP graduate entrepreneurs surveyed was $21.19 per hour, 192 percent greater than minimum wage. The average income of PEP graduate entrepreneurs was 276 percent greater than the average hourly earnings for formerly incarcerated men in Texas.

As one graduate entrepreneur interviewed by ICIC explained, entrepreneurship was the only pathway to financial security: “At the first place I worked at out of prison, I was told that the job paid $13 per hour, but with a felony only $10. I didn’t want to start a business for a few years, but decided I had to because it was the only way to financially survive. I’ve been able to buy a house and truck—I wouldn’t be able to afford these otherwise.”

Reducing Recidivism

Incarceration and recidivism are significant challenges in Texas, especially for men. Over 125,000 men were incarcerated in Texas in 2016 and 23 percent of males released from a state prison in Texas will return to prison within three years of release. In comparison, only seven percent of PEP graduates return to prison within three years of release.

PEP’s curriculum and leadership training is designed to help students develop re-entry plans and build hope, optimism and resilience. For many graduate entrepreneurs ICIC interviewed, they felt that the lifestyle changes they made while in prison were the biggest factors in reducing their chances of going back to prison.

As one graduate entrepreneur interviewed by ICIC explained, “Prison is detrimental to the extent that it does not require you to have a job or get through education. If it was up to me, everyone would have to go through PEP before coming home. It forces you to think about where you are in life and come up with a plan for yourself. To have a program where you can get away from prison and have people invest in you and empower you, it gives you an opportunity to have a voice. When you couple that with the networking side, the social side, it empowers people to take off the years of fear that prison gives you. I don’t have enough good things to say about the program.”

PEP Drives Growth in Texas

The economic impact of all active PEP businesses in Texas was measured using IMPLAN in partnership with the University of Massachusetts Donahue Institute.

In 2017, 357 PEP graduates were released from prison. The estimated fiscal impact per released graduate after one year was $12,053 in cost savings to the state and federal government. PEP’s annual program costs $2.7 million, which is fully funded by private sources, including corporate, philanthropic and individual donations. The one-year investment of $7,591 per released graduate by PEP donors results in a one-year “Return on Investment” of 159 percent. After five years, the “ROI” increases to 794 percent.

Policy Implications

PEP has demonstrated that entrepreneurship works as a deterrent for recidivism and should be considered as an alternative to traditional ex-offender workforce development and re-entry programs. Businesses created by PEP graduate entrepreneurs have a significant impact on their community and many operate in areas with limited economic opportunities and create jobs for formerly incarcerated individuals. It is a program worth replicating in other states dealing with high incarceration and recidivism rates.